I am having few queries in a single case. The case is, one of our employee is associated with us in a retail shop since 2013 in Haryana, hence in 2021, he has become eligible for Gratuity. We took over someone's buisness in November 2017 and operated till April 2021. Due to Covid-19, we are shutting down our business owing to severe losses. The employee's monthly Gross Salary is ₹23,000 ( Basic-₹9,000, HRA-₹4,500, Other Allowances-₹ 9,500). The employee is Class 10th pass and had done 6 months certificate course only My question is- 1. Is it necessary that Basic salary should be equal to the Minimum Wages of the State? 2. As per our calculations, his gratuity payable was ₹38,878. Please help me if my calculations are wrong. No. of years of service-7.5 years 3. Minimum Wages in 2018 when we revised salary, we considered him in Semi Skilled (A) worker was ₹8,969.
04 May 2021
Calculation of gratuity shall be last basic pay drawn x 15 days for each completed 6 months or part thereof. Whether basic salary of the employee is stated to be less than Minimum Wages prescribed by Government of Haryana.?
04 May 2021
"wages" means all remuneration, capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment includes house rent allowance], but does not include--
(i) the value of--
(a) any house-accommodation, supply of light, water, medical attendance, or
(b) any other amenity or any service excluded by general or special order of the appropriate Government;
(ii) any contribution paid by the employer to any Pension Fund or Provident Fund or under any scheme of social insurance;
(iii) any travelling allowance or the value of any travelling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge;
For calculating the per day wage of the employee, the monthly wage (last drawn Basic + Dearness Allowance) is divided by 26 and the result is multiplied by 15 x the number of years of service; i.e. Gratuity = (Basic + DA) x 15/26 x number of years. At present, gratuity is fixed on the basis of salary of 15 days every year on completion of five years job. The gratuity is given to the employees on behalf of the company. Its maximum limit is 20 lakh rupees. The employee worked for 20 years in the same company and his final salary is 60 thousand rupees.
I sincerely appreciate your efforts to resolve my query but I am still not clear.
My concern is that since we do not have any Dearness Allowance (DA) in the salary we offer. We have just Basic+ HRA + Other Allowances. I have calculated gratuity on Basic Only. I wanted to clarify if my calculations are correct or not? Secondly, the state has not specified that basic salary has to be minimum wages. However, in total, the salary offered to him is way more than minimum wages.
07 May 2021
You can pay as per his entitlement within the definition of wages in your company. Being statutory compliance you can consult a CA who can guide you correctly on calculation and after perusal of documents to rely on.